Subject: 9/9/9 taxes as proposed by Cain
Annual national Corporate Profits: 1.68 Trillion 4th quarter annualized
add back 329 billion taxes paid and true profits= $2.009 Trillion
9% = $181 billion
Annual national Personal Income = $13 Trillion
9% = $1.17 Trillion
National Consumption = 71% of GDP = 71% of 14.74 $Trillion = $10.47 Trillion
9% = $942 billion
Total taxes in 9/9/9 = $181 billion + $1.117 Trillion + $942 billion = $2.29 Trillion
Current Annual Government expenses = $3.7 Trillion
Cain Deficit = $2.29 Trillion - $3.7 Trillion = -$1.4 Trillion
Current Deficit = $1.07 Trillion
Conclusion; Cain's 9/9/9 taxes still leaves an even larger deficit. However, this is assuming everything stays the same and my belief is that it won't. Read on please.
Cain will need to cut expenses, but not by $1.4 trillion
Because the tax burden shifts from production to consumption, corporations, small businesses and enterpeneurs will hire more.
Let's assume a 20% increase in corporate profits due to increase in business and increased demand by lower personal income taxes:
Now Corporate tax = 1.2 times $181 billion = $217 billion
Unemployment drops to 4 % as businesses need to hire more to keep up with production due to increased demand. This drop in unemployment from 9.1% current to 4% represents an additional 7.8 million more people working and paying taxes. With an average USA salary of $48,000 this 7.8 million additional workers now represent an additional $374 billion of taxes.
Now personal income taxes at 9% = $1.17 Trillion + $374 billion = $1.54 Trillion
Consumption tax . Since 7.4 million are now working and can actually spend money, consumer confidence increases and people actually buy things despite a 9% sales tax. We will now increase spending by 5% ( 5 % more people employeed) = 1.05 * $942 billion = $989 billion.
Total revenues now equal $217 billion + $1.54 Trillion + $989 billion = $2.75 Trillion
Current deficit now equals $3.7 Trillion - $2.75 Trillion = $949 billion.
I hope this sheds light on why republicans and libertarians want to balance the budget not by increasing taxes but by increasing the number pf people that pay taxes. Taxes are lower and more revenues come in.
He will need to cut expenses, but not by $1.4 trillion